Improving Decision Making & Collaboration

What led you to focus on finance at Harvard Business School?

I started my career working in central banking at the Bank of Canada. I then got a doctorate at the University of Rochester and began teaching business at the University of Texas at Austin. I gave a couple of seminars at HBS and came to really appreciate the School's focus on learning from managers and business practitioners.

I wasn't drawn to finance at first, but I was interested in issues surrounding restructuring and business reorganization. What do troubled companies do when they go through hard times and their very future is at risk? How do they transform themselves? Sometimes this involves a bankruptcy, but a company can restructure itself in many different ways. I think about this as a process of corporate recovery—how do you save the patient? That led me to the study of corporate finance, which plays a hugely important role in how companies are restructured.

Why is it important for business leaders to understand finance?

Understanding finance gives you a foundation for making better business decisions, valuing investment opportunities, and measuring performance more effectively. I like to say that finance is too important to leave to the finance managers. It's an enormously powerful way of viewing the world. You can use it to complement your intuition about what drives value in a company.

Many of the executives who come to AMP don't have an extensive background in finance. They know that they need to acquire a deeper understanding of finance to advance their careers and develop their capabilities, and arrive here feeling somewhat apprehensive because they find finance difficult and intimidating. But one thing I have learned from teaching and studying finance is that the core foundational concepts and tools in finance are in fact relatively simple. Everyone has had the experience of balancing a checkbook or taking out a loan to finance the purchase of a home or car. In many ways, corporate finance is just personal finance with more zeros on the end. For that reason, many executives already have an intuitive understanding of finance embedded in them, though they may not realize that. It's my job is to bring that out.

I try to strip away the jargon, strip away any excess numbers, and explain finance in simple, intuitive terms. With the right guidance and encouragement, executives come to understand that finance need not be inaccessible or technically difficult.

How do you approach teaching?

My teaching style is very interactive and I try to create a dynamic experience in the classroom. Once I'm in my "zone," I'm not really focused so much on the process of teaching as on having a conversation with people who understand business. And to the extent possible, I try to bring humor into the discussion—who would ever have thought that finance could be fun?

I listen carefully to people and try to incorporate what they say into the discussion. My colleagues and I are like conductors of an orchestra. Our performance is not the focus. The idea is to get people to agree, disagree, debate, engage, and figure out why they may have different views and opinions about an issue. Is it because they come from different industries or countries? Is it because they are relying on different data or experiences to form their conclusions, or are they analyzing the same data differently? Or do they come with certain preconceptions and assumptions that influence how they interpret the facts of a situation?

When I teach executives, especially when they bring the wealth of experience that's typical of participants in the AMP program, it's not about me "giving" and them "receiving." Rather, it's very much a two-way exchange of information. I'm learning from them as much as I hope they're learning from me and from each other. We have very honest and candid discussions about issues that not everyone might agree on. That’s similar to what happens when I do research or consulting. I'm learning. There's a challenge or an opportunity that has to be dealt with, and we're framing and investigating the problem together.

Given the range of backgrounds in the AMP classroom, how do you engage everyone?

To the extent possible, in every class I try to make sure that everyone in the room is involved in the conversation, or feels connected to the issues that are being discussed. Before the program begins, my colleagues and I do a lot of pre-work to get to know the AMP participants. We study their profiles and familiarize ourselves with their companies. Using that knowledge, we try to take full advantage of everyone's experience in the classroom.

As the participants become increasingly comfortable with the case method of learning, they are eager to engage in the class conversation and speak their minds, with little prompting by the faculty. Certain cases are going to appeal to some people more than others, but the huge diversity of backgrounds and personalities in the classroom ensures that there is always somebody present who can contribute materially to the learning experience.

Every week I hold a voluntary "finance tutorial" for participants who want to review the previous week's learnings, in a more informal setting intended for those who feel they need additional reinforcement in finance. Participants who have attended these sessions have told me they found them to be very helpful in building their confidence levels.

And, of course, we also get to know the participants through various opportunities to interact on campus, outside the classroom—including dinners, lunches, wine tastings, individual meetings with faculty, and voluntary sessions organized outside the regular curriculum.

What do you want executives to take away from AMP?

I hope that the participants who are intensively studying finance for the first time will see that finance is something they should add to their toolbox as general managers. I want them to learn the essential concepts and tools that will enable them to engage with their finance staff more effectively when they return to their organizations. If you're a senior marketing executive, for example, you may be used to viewing business challenges through a marketing lens. But if you can also analyze these challenges through a finance lens, you may discover more effective ways to meet the challenge, or avoid making costly mistakes that result from taking too narrow an approach to understanding a problem. Gaining a little knowledge and some comfort with financial concepts, language, and tools empowers you to ask the right questions. When you are working with your CFO or the financial managers in your company, you will be able to communicate more effectively and get the information, advice, and support that you need.

For those executives with a finance background, I hope that what they learn in AMP will help them break down barriers to communication and collaboration that may exist in their organizations. The challenge for financial practitioners in general is that their non-finance colleagues often do not understand what they do. There's a failure to communicate, share, and trust. Sometimes finance managers aren't even aware that what they're saying doesn't resonate with their colleagues. But the finance function needs to be an effective business partner with the rest of the organization. By coming to AMP, working through the cases, and learning side by side with peers from outside finance, finance executives learn how to communicate more effectively across their organizations. They discover what other executives don't understand about finance. In their AMP living groups they often take on the role of mentors or advisers who help the people who are not financial specialists. In the process, they learn how to be effective colleagues when they go back to their organizations.

Can you describe the process of writing an HBS case?

Case studies are the basis of what we do at Harvard Business School—the case method of learning. Each case is based on challenges and opportunities faced by real companies and one or more real executives who have to make a decision. Writing a case study is intellectually fascinating because I get to meet with managers, investment bankers, lawyers, vendors, operating people, financial people, and HR people so that I really understand what's happening in the company.

Then I write about that business situation, distilling it down to its core. Writing an effective case study involves tradeoffs. I have to include enough information in the case to allow students or executives to do a reasonable analysis and support a concrete recommendation or conclusion. But sometimes you have to know what information to exclude from the case so that the discussion has legs. The best cases allow students to reach different conclusions or bring different points of view to the discussion and to understand why they might disagree—for example, because they lack certain critical data, or are bringing certain preconceptions with them that they may not even realize they have.

How does AMP help executives address risk in their businesses?

Because risk is a major concern of CEOs, CFOs, and other executives, it's an important topic in AMP. Risk is a fact of life when you are doing business. Finance gives people concepts and tools for understanding, measuring, and ultimately managing risk more effectively.

Risk comes in a multitude of forms. It can involve anything from risk of interruption in the supply chain or risk of customers not accepting your product to foreign exchange risk, commodity price risk, interest rate risk, and inflation risk. I encourage executives to not think about risk as something to be avoided, but rather as something to be understood, measured, and then factored into the decision-making process in order to make more value-creating investments. The old adage applies—no risk, no return. Executives must learn how to embrace risk.

Viewed one way, risk and uncertainty are about the downside—failure or loss on an investment. But risk and uncertainty are also about flexibility and resilience. You can't expect to anticipate everything that might happen in your business, but you can receive new information, process it, and incorporate it into better business decisions. Flexibility helps companies manage risk more effectively. We all have the ability to be flexible and change course. The study of such flexibility, and the value it can bring to an organization, is known as real investment options analysis. Real investment options are all around us. Managers often have the flexibility to change how they source and combine inputs in the production process, or have the flexibility to slow down production when prices fall, or to double down and increase the scale of an investment when it turns out to be a profitable venture.

How is AMP different from other programs for senior executives?

AMP participants are senior people in their organizations and come with a wealth of experience. The program is designed to get these executives to share their experiences, insights, and opinions. In addition to that depth of experience, the group is enormously diverse—in terms of industry, country, ethnicity, culture—and that diversity really opens a lot of eyes and opens doors that people did not know were there.

What sets HBS apart from other schools is the emphasis on general management education. The general management approach holds that in order to run a complex business more effectively, you really have to understand all the moving parts and be comfortable dealing with issues that arise in many different contexts—everything from strategy to operations to finance to accounting to HR. This approach emphasizes multi-disciplinary learning. It breaks down walls between silos and gets people to think more broadly about how to deal with a problem or challenge rather than just looking at it through the lens of the discipline in which they were originally trained. It gets them to understand how to communicate with other functions in the organization and how to manage across all those functions.

How do you collaborate with other AMP faculty?

AMP benefits from an exceptional level of interaction among the faculty. We all love teaching in this program and want to make sure that the participants get the most out of the experience. We are not just a bunch of individual instructors coming in and teaching our subjects; we have a shared goal and we work together closely. We meet before the program starts and are in constant touch with one another while the program is in session to make sure we understand what everyone else is teaching and that we are sending a consistent message.

Sometimes we'll have two cases that deal with exactly the same company, but one might be taught, for example, by a negotiations professor and the other by a finance professor. We'll collaborate to make sure there’s a seamless transition from one case to the other and that the two sessions complement each other.

Do you interact much with AMP participants outside the classroom?

During the program, I'll have numerous one-on-one meetings with people who want to talk with me. Perhaps they have a problem in their company and want a sounding board and a fresh perspective—to see if there's a different way of approaching the problem. I welcome those conversations because I am always learning.

Through those interactions, and through the intensity of learning together and socializing together for eight weeks, we build a lot of friendship and trust that continues after the program ends. We form enduring bonds with the participants, and they form enduring bonds with one another. Email and online communities help us stay in touch. Sometimes people come back to campus and look me up. I find the relationships with executives very rewarding. It's not just a short-term engagement on campus—they build long-term relationships with the faculty and the School.

What do you find most satisfying about teaching in AMP?

During the closing ceremony and dinner, I am inspired by the sense of joy and accomplishment in the room. I am delighted to see the change that has taken place during the program—particularly because I know that many participants were initially intimidated by finance. By the end of the program, participants are relieved and overjoyed that they actually get finance now. More important, they are embracing finance and looking forward to using it when they get back to work. The program is transformative.

I love working with the executives in AMP, learning from them, and being able to fully engage with them in a classroom in which no one is being graded. Everyone is there to learn, grow, and share knowledge and experience. The participants are enthusiastic, energetic, and motivated. It's a pure learning environment. The experience transforms people. That's what I enjoy the most.